Tempe, Arizona - Economic activity in the manufacturing sector expanded in March for the eighth consecutive month, and the overall economy grew for the 11th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee. "The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation - perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."

What Respondents Are Saying ...- "Certain markets served have increased by 50 percent in new customer orders, while other markets are not as strong." (Miscellaneous Manufacturing)- "Business levels continue to be strong coming out of the Chinese New Year. First quarter will be our best since 2000." (Machinery)- "Business is steady and prospects are good for Q2." (Food, Beverage & Tobacco Products)- "After-market sales are improving as more vehicles require maintenance." (Transportation Equipment)- "There is a serious shortage of basic electronic components, and lead times are becoming a problem. We are also seeing dramatic price increases." (Computer & Electronic Products)

Commodities Down in PriceNatural Gas is the only commodity reported down in price.

Commodities in Short SupplyNo commodities are reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.

March 2010 manufacturing index summaries

PMI

Manufacturing continued to grow in March, with the rate of growth accelerating as the PMI registered 59.6 percent, an increase of 3.1 percentage points when compared to February's seasonally adjusted reading of 56.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 11th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the eighth consecutive month. Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (58.2 percent) corresponds to a 5.4 percent increase in real gross domestic product (GDP). In addition, if the PMI for March is annualized, it corresponds to a 5.9 percent increase in real GDP annually."

New Orders

ISM's New Orders Index registered 61.5 percent in March, 2 percentage points higher than the seasonally adjusted 59.5 percent registered in February. This is the ninth consecutive month of growth in the New Orders Index. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

ISM's Production Index registered 61.1 percent in March, which is an increase of 2.7 percentage points from the February reading of 58.4 percent (seasonally adjusted). An index above 51 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. This is the 10th consecutive month the Production Index has registered above 50 percent.

ISM's Employment Index registered 55.1 percent in March, which is 1 percentage point lower than the seasonally adjusted 56.1 percent reported in February. This is the fourth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

The delivery performance of suppliers to manufacturing organizations was slower in March as the Supplier Deliveries Index registered 64.9 percent, which is 3.8 percentage points higher than the 61.1 percent registered in February (seasonally adjusted). This is the 10th consecutive month the Supplier Deliveries Index has been above 50 percent. A reading above 50 percent indicates slower deliveries.

Manufacturers' inventories expanded in March following 46 months of contraction, as the Inventories Index registered 55.3 percent. The index is 8 percentage points higher than the seasonally adjusted February reading of 47.3 percent. An Inventories Index greater than 42.6 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The ISM Customers' Inventories Index registered 39 percent in March, 2 percentage points higher than in February when the index registered 37 percent, and the 12th consecutive month the Customers' Inventories Index has been below 50 percent. The index indicates that respondents believe their customers' inventories are too low at this time.

The ISM Prices Index registered 75 percent in March, 8 percentage points higher than the 67 percent reported in February. This is the ninth consecutive month in which the Prices Index has registered above 50 percent. While 53 percent of respondents reported paying higher prices and 3 percent reported paying lower prices, 44 percent of supply executives reported paying the same prices as in February. A Prices Index above 49.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

ISM's New Export Orders Index registered 61.5 percent in March, 5 percentage points higher than the 56.5 percent reported in February. This is the ninth consecutive month of growth in the New Export Orders Index.

Imports of materials by manufacturers expanded in March as the Imports Index registered 57 percent, 1 percentage point higher than the 56 percent reported in February. This is the seventh consecutive month of growth in imports.

Average commitment lead time for Capital Expenditures decreased 2 days to 116 days. Average lead time for Production Materials decreased 5 days to 45 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 1 day to 23 days.